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Businesses decry tax incentives

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says the  proposed K2.2 trillion National Budget 2020/21 has failed to consider private sector tax incentives.

In a written response on Saturday in response to the budget presented on Friday by Minister of Finance Felix Mlusu, MCCCI director of business environment and policy advocacy Madalitso Kazembe observed that tax incentives have not been included in the fiscal plan. 

Presented the budget: Mlusu

She said: “We also expected the minister to articulate measures they will undertake to pay outstanding arrears to private sector going forward as this has been a big challenge for years.

“The budget has, however, emphasised the need to integrate the informal sector into the system, which if it were to succeed could be one way of widening the tax base.”

Kazembe, however, said overall, the budget will address fiscal deficit measures and emphasises on reducing overall debt by coming up with a Debt Reducing Fund.

In its 2020/21 National Budget proposal, MCCCI hoped for efficiency-driven fiscal policies and reduced tax burden from the government.

Among others, MCCCI wanted Treasury to review excise taxes to counter smuggling, lower corporate tax from 30 percent to 20 percent to stimulate growth and investment and reduce value added tax (VAT) from the current 16.5 percent to 13 or 14 percent to create demand.

The chamber also called for the need to expedite VAT refunds to businesses from the current 40 weeks and extend tax allowances for corporate social responsibilities.

However, in his 2020/21 National Budget Statement, Mlusu announced new tax measures on income tax, VAT, which included an  increase in pay as you earn (Paye) zero-rate tax threshold from K45 000 to K100 000 per month.

He also announced an increase of the withholding tax threshold for casual labourers from K15 000 to K35 000 per transaction and VAT on cooking oil.

On his part, Employers Consultative Association of Malawi executive director George Khaki said in an interview on Saturday that employers support the 2020/21 fiscal plan, observing that government is doing the right thing in putting in place measurees that will bring back the economy to life after the economic slowdown due to the Covid-19 pandemic.

He said: “We proposed the increase in the tax-free bracket as part of mitigation measures against Covid-19. This will enable employees to have more disposable incomes to support their families.

“This will in turn increase their spending, leading to more demand for goods and services. This increased demand for goods and services is what we need to kick-start the economy in light of Covid-19 because the more goods and services are bought, the more jobs will be created.”

In the statement, Mlusu said government will focus on achievement of sustainable and inclusive growth, macroeconomic stability and sound fiscal management.

He said the objectives will be  pursued through transparency and accountability, rule of law, enhanced resource mobilisation, efficient resource utilisation and provision of infrastructure.

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